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24 January 2018

How difficult is it for a landlord to resist a tenant’s claim for a new lease under the ground of redevelopment?

Following the recent case of S Frances Ltd v The Cavendish Hotel (London) Ltd [2017], it may be getting easier for a landlord to resist a claim. In this case the landlord contrived a scheme of works purely so they could object to the application for a new lease. The works had no useful commercial purpose but they successfully proved a ground of opposition to defeat the application for a new lease.

Key facts; the tenant carried on an antiques business specializing in tapestries and textiles based on the ground floor and basement of the Cavendish Hotel. Towards the end of the lease the tenant served a section 26 request on the landlord and requested a new lease. The landlord served a counter notice opposing renewal under Ground f, section 30 (1) of the 1954 Act (‘the Act’):

The works proposed if completed would have little practical use. Planning permission would be needed to use the new units and the landlord was going to proceed even if he could not obtain this. Further the landlord intended to demolish an internal wall and lower the basement for no reason other than to make the works ‘substantial’. The scheme of works were devised entirely to satisfy ground f.

The court’s decision; both at trial and on appeal it was held that the landlord had a ‘settled’ intention to carry out the works. The landlord had even given a costly undertaking that all the works would be carried out if possession were ordered. The tenant asserted that the intention to carry out the works was not within the meaning of ‘intention’ in ground f. Both judges rejected this argument and it was explained that ground f asked the court to consider what the landlord was doing and not why they were doing it.

The motive was not important. The fact that the works were going to be carried out and an undertaking was given to further demonstrate the intention meant the court had no choice but to come to this conclusion.

The essence of the Act is not to enable a wealthy landlord to evict a tenant by carrying out fruitless works but that is, it appears, the way the Act was interpreted and operates.

Practical effect; the most poignant issue here is a worry to tenants as the court confirmed that so long as the landlord can show a settled intention to carry out the works and a reasonable prospect of being able to carry them out, the motive is irrelevant. The test is not of the viability of a project and the court is not concerned as to the reasons behind works even if it is admitted that the landlord is only carrying out the works to secure vacant possession.

Careful advice must be given to both tenants and landlords if ground f is being considered. It may now be considered a more realistic possibility for refusal (from a landlord’s point of view). Equally, a tenant’s position could be weaker now it has been shown that a landlord may be successful under this ground even if the works are contrived.

This case also open us up to the possibility for further hurdles for tenants under different grounds of opposition. The Act contains no anti- avoidance provisos, there are therefore opportunities to exploit other section 30(1) grounds. For example a landlord could contrive a plan whereby he asserts he needs the property back for himself to occupy. If there is no need to prove the motive behind such actions he may succeed.

The tenant in this case has been given permission to make a leapfrog appeal direct to the Supreme Court (under the Administration of Justice Act 1969) so watch this space for potential clarification of the interpretation of the grounds in section 30 or at least an explanation as to what ‘intention’ means so as not to defeat the object of the Act.

For more information contact Simon Painter

Lisa Faulkner

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